Fitch Affirms IM FTGENCAT SABADELL 2
EUR50.5m Class A(G) notes: affirmed at 'BBBsf'; Stable Outlook
EUR19.8m Class B notes: affirmed at 'CCCsf'; Recovery Estimate revised to 70% from 50%
EUR5.7m Class C notes: affirmed at 'CCsf', Recovery Estimate 0%
The transaction is a securitisation of finance leases on real estate and certain other assets originated in Spain by Banco de Sabadell.
KEY RATING DRIVERS
The ratings reflect the satisfactory collateral performance and continuing de-leveraging of the pools. They also take into account its decreasing delinquency and stable loss ratios. As of end-October 2015, 90+ day delinquencies were at 1.1%, cumulative defaults at 6.0% and cumulative losses at 3.3%. Fitch has maintained the lifetime default base case of 9.5% and its recovery base case at 30%. Furthermore, we have increased the Recovery Estimate for the class B notes to 70% from 50%.
Fitch has not given credit to recourse to real estate collateral in all rating scenarios following the withdrawal of Sabadell's ratings in March 2014. The majority of assets in the pool are lease instalments backed by real estate. Real estate leasing contracts under Spanish law do not offer the same level of security as mortgages. This is because repossession proceeds would only be available after the originator has covered its residual value loss, provided it is not insolvent. The Spanish legal framework indicates that the SPV would only have an unsecured claim against the insolvency estate of the originator, which would rank pari passu with all other unsecured claims against the insolvency estate.
Sabadell continues to be the interest rate swap provider for this transaction. Fitch has taken this information into account and any impact of Sabadell as the swap counterparty in line with its counterparty criteria for structured finance transactions.
Only the lease receivables portion of the lease contracts is securitised (excluding any residual value component). All obligors are small and medium-sized enterprises located in the region of Catalunya, the home region of the originator.
Expected impact upon the note rating of increased defaults (Class A (G); Class B; Class C):
Current Rating: 'BBBsf'; 'CCCsf', 'CCsf''
Increase base case defaults by 10%: 'BB+sf'; 'CCCsf'; 'CCsf'
Increase base case defaults by 25%: 'BB-sf'; 'CCCsf'; 'CCsf'
Expected impact upon the note rating of decreased recoveries (Class A (G); Class B; Class C):
Current Rating: BBBsf'; 'CCCsf', 'CCsf''
Reduce base case recovery by 10%: 'BB+sf'; 'CCCsf'; 'CCsf'
Reduce base case recovery by 25%: 'BB+sf'; 'CCCsf'; 'CCsf'
Expected impact upon the note rating of increased defaults and decreased recoveries (Class A (G); Class B; Class C):
Current Rating: BBBsf'; 'CCCsf', 'CCsf''
Increase default base case by 10%; reduce recovery base case by 10%: 'BBsf'; 'CCCsf'; 'CCsf'
Increase default base case by 25%; reduce recovery base case by 25%: 'BB-sf'; 'CCCsf'; 'CCsf'
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool[s] ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
Sources of Information: Monthly/Quarterly investor reports and pool tape provided by the servicer.